Tapestry(US:TPR)2023-05-11 16:11Financial Data and Key Metrics Changes - The company achieved a 9% constant currency revenue growth, significantly surpassing expectations of 3% to 5% [28][29] - Operating margin expanded by approximately 280 basis points year-over-year, driven by gross margin gains [28][32] - Earnings per share (EPS) increased by over 50% compared to the prior year [28][32] Business Line Data and Key Metrics Changes - Coach brand revenue increased by 11% at constant currency, with over 300 basis points of operating margin expansion [10] - Kate Spade outperformed expectations with revenue gains and gross margin expansion, focusing on emotional and lifestyle branding [18][20] - Stuart Weitzman delivered 10% revenue growth in constant currency, supported by double-digit growth in North America [23][24] Market Data and Key Metrics Changes - International businesses grew nearly 20% excluding foreign exchange impacts, with Greater China sales increasing by 20% [6][29] - Japan saw sales rise approximately 23%, while other Asia regions grew by 22% [30] - North America experienced low single-digit sales growth, with a noted decline in consumer spending trends as the quarter progressed [7][29] Company Strategy and Development Direction - The company is focused on building lasting customer relationships and enhancing omnichannel experiences, acquiring over 1.2 million new customers in North America [8][9] - Emphasis on product innovation and data-driven strategies to enhance brand relevance and customer value [9][18] - The launch of Coachtopia aims to disrupt the fashion industry with sustainable practices and community engagement [16][68] Management's Comments on Operating Environment and Future Outlook - Management noted a more cautious consumer backdrop in North America, impacting sales expectations for the fourth quarter [42][63] - Positive momentum in China and other Asian markets is expected to continue, with a focus on capturing domestic consumer demand [43][72] - The company raised its fiscal year 2023 revenue and earnings outlook based on strong third-quarter performance [35][40] Other Important Information - The company returned $270 million to shareholders, demonstrating commitment to enhancing long-term value [28][34] - Free cash flow for the quarter was an inflow of $71 million, with inventory levels favorable to expectations [34] - The company plans for approximately $1 billion in shareholder returns for fiscal 2023, including share repurchases and dividends [34] Q&A Session Summary Question: Demand backdrop in North America and China - Management acknowledged solid third-quarter results but noted a more cautious consumer in North America, while China showed strong growth across all channels [42][43] Question: Confidence in long-term targets - Management expressed confidence in the $5-plus EPS target, emphasizing disciplined operations and strong gross margin performance [46][48][49] Question: Promotional stance and outlook for AUR - Management indicated a disciplined promotional environment, with expectations for continued AUR gains and gross margin growth [51][52] Question: Health of the handbags and accessories category - Management described the handbag category as resilient, with strong emotional connections driving sustainable growth [56][57] Question: Changes in North American consumer engagement - Management noted a broad-based softness in consumer engagement, with a focus on maintaining brand health and pricing power [62][63] Question: Coachtopia and sustainability - Management highlighted Coachtopia's success and its potential to scale, emphasizing sustainability and material innovation [68][69]